Aggregate Information and Organizational Structures*

We study information flows in an organization with a top management (principal) and multiple subunits (agents) private that determines the organization's overall efficiency. Under centralized communication, eliciting agents' may induce principal to manipulate aggregate information, which obstructs effective use of information. hierarchical concedes more rent due loss control, but is able effectively. The trade-off between organizational structures depends on likelihood agents are efficient. Centralized communication optimal when such low. Hierarchical by contrast, it high.